NEW YORK (Reuters) - Wall Street hit record closing highs on Monday as optimism increased about the likelihood of lower corporate tax rates as the Republican tax bill moved closer to passage.
The Nasdaq surpassed the 7,000-point mark during the session but closed below that level.
The Republican-controlled U.S. Congress is expected to begin voting on sweeping tax legislation on Tuesday, aiming to get the bill to President Donald Trump to sign into law by the end of the week. Republican U.S. Senator Susan Collins said she would vote for the sweeping overhaul, all but ensuring its passage.
“This Congress has shown an inability to pass anything over the past five years,” said Michael O‘Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut. “If a major piece of legislation is passed, you’d expect the markets to be happy.”
The bill would cut corporate tax rates to 21 percent from 35 percent, which investors are betting will boost profits as well as trigger share buybacks and higher dividend payouts.
Another expected outcome of lower taxes is cash repatriation, which market analysts say could boost mergers and acquisitions.
“A lot of the things in the tax proposal are better for stocks than anything else,” said Rob Stein, chief executive officer of Astor Investment Management in Chicago.
The Dow Jones Industrial Average .DJI rose 140.46 points, or 0.57 percent, to 24,792.2, the S&P 500 .SPX gained 14.36 points, or 0.54 percent, to 2,690.17 and the Nasdaq Composite .IXIC added 58.18 points, or 0.84 percent, to 6,994.76.
Besides the three indexes, the Nasdaq 100 .NDX and the S&P 100 .OEXA also hit record highs. The small-cap Russell 2000 rose 1.2 percent to a record closing high.
The materials index .SPLRCM gained 1.5 percent, the most among the major 11 S&P sectors. The utilities index .SPLRCU had the largest decline, with a drop of 1.2 percent.
Utilities suffer from higher interest rates, which the Federal Reserve announced last week, and they are expected to see less upside from tax cuts than other sectors, Stein said.
On Monday, investors were treated to a flood of deals.
Twitter (TWTR.N) jumped 11 percent after JPMorgan said it expects the company to post double-digit daily average user growth in 2018.
Advancing issues outnumbered declining ones on the NYSE by a 2.43-to-1 ratio; on Nasdaq, a 2.13-to-1 ratio favored advancers.
About 7.1 billion shares changed hands on U.S. exchanges. That compares with the 6.8 billion daily average for the past 20 trading days, according to Thomson Reuters data.
Additional reporting by Sruthi Shankar in Bengaluru; Editing by Chizu Nomiyama and Nick Zieminski